A recent study by Harvard designed to map out the economic complexity of a nation exposes a little known paradox of the Australian economy:
That is despite being the eighth-richest nation in the study, Australia still has the same export profile as Angola.
Specifically, what the study measures is the complexity of the goods and services that a country exports.
And when compared to other nations across the world, Australia was ranked just 93rd — lagging behind Kazakhstan, Uganda and Senegal.
However, more than just noting that Australia ranks poorly, we should ask: Why?
The study points out that about 70 percent of the products we sell to foreign buyers, on a net annual basis, are minerals and energy.
If you add in food, alcohol, wool, tourism and metal products, however, the figure rises to around 99 percent.
Basically, Australia’s economy is heavily relying upon natural resources to keep it afloat, without any significant advances in manufacturing or innovation.
For example, Australia’s three biggest exports in 2018 were coal, iron ore and liquified natural gas (LNG).
What Does This Mean For the Australian Economy?
The study suggests that our economy will grow slowly as a result. They project that Australia will be ranking in the bottom half of countries globally, at a merely 2.2% annual growth rate over the next decade.
In order to improve national growth and complexity ratings, the study further suggests that countries look at expanding into more complex exports based on less complex industries where they are already strong.
For example, they recommend that Australia should branch out in related sectors with a higher potential for new diversification, such as Industrial Machinery and Miscellaneous chemical products. With possibilities of manufacture things like vehicle bodies, forklift trucks and pharmaceutical goods.
This will, in turn, increase the nation’s wealth and support higher wages, according to Harvard’s Center for International Development.